IBA protests as Bank of Maharashtra CEO, others held over DSK loan scam

The move comes after the economic offences wing of the Pune police arrested Bank of Maharashtra MD and CEO Ravindra Marathe, executive director R K Gupta and zonal manager Nityanand Deshpande in connection with a loan given to real estate developer D S Kulkarni that has gone sour.

The police also arrested the bank’s former CMD Sushil Muhnot, thr borrower's CA Sunil Ghatpande, and vice president of the engineering department of Kulkarni’s firm, Rajiv Newaskar.

At a meeting on Friday of the Indian Banks’ Association (IBA), the apex banking lobby, it was decided a meeting with senior government officials be held next week to press the case.

V G Kannan, CEO of the IBA, said the association would provide legal assistance to embattled bankers even after their retirement.

Bankers also suggested that the IBA set up an independent committee comprising senior bank executives to look into the probity of allegations levelled against banks. They want law enforcenent agencies to consult the panel before taking any punitive action.

Sources said bankers held discussions with chief minister Devendra Fadnavis late on Friday night about the arrest of BoM executives. The department of financial services is also looking into the issue.

The Economic Offences’ Wing of the Pune police had arrested Marathe on Wednesday morning when he was returning from Yoga classes. Kannan said the bankers were not given any notice. They were presented before the court and straightaway arrested under the Maharashtra Protection of Interest of Depositors (MPID) Act, he said.

However, the “Act is not applicable for bankers,” he said, adding that according to the Reserve Bank of India (RBI) guidelines, “any loan fraud of above Rs 2.5 billion has to handled only by the Central Bureau of Investigation. We are unable to understand how arrests have been made by the state police.”

The bankers say Bank of Maharashtra had a long association of over 20 years with the builder, and was part of a consortium of lenders that had extended a loan of Rs600 crore to the group. Bank of Maharashtra had a share of Rs100 crore in the loan. Bank of Maharashtra also recently released a short-term loan of Rs15 crore to the group, but recalled the loan later.

Bankers say the Pune police had gone in undue haste and “rushed in to arrest” the bankers.

“The entire episode is unfortunate and is a cause for concern for bankers. The IBA has decided to lead representations to the highest authorities within the government with a memorandum by senior bankers from the industry,” the IBA CEO said in an interaction with the media.

According to the IBA, safeguarding bankers on a bona fide decision is critical for the growth and development of the economy. However, the concern now was that simultaneous investigations by different investigative agencies are being conducted on the same transactions, affecting normal functioning of the banks, Kannan said.

“The economy has bigger issues, and many internal factors lead to NPAs. Just because a company goes into NPA, it is not fair to blame bankers (for this),” Kannan said.

“The entire banking community is backing Bank of Maharashtra,” he said, adding there was now “an element of anguish and to some extent, bankers are demoralised as they are being pulled out over short notice.”